Bitcoin Price Potentially Boosted by China’s Economic Stimulus Measures

Cryptonews Politics John Brightwater September 26, 2024

Bitcoin Price Potentially Boosted by China’s Economic Stimulus Measures

Bitcoin (BTC) may see a price increase following the People’s Bank of China’s (PBOC) recent 50 basis point cut to the reserve requirement ratio (RRR), which injects $113 billion into the market. Historical data suggests similar actions from the PBOC have resulted in substantial price gains for Bitcoin. Analysts predict that ongoing global central bank rate cuts, alongside Bitcoin’s halving cycle, may further drive its price upward, with estimates suggesting it could reach $200,000 by 2025.

The recent decision by the People’s Bank of China (PBOC) to reduce the reserve requirement ratio (RRR) by 50 basis points could significantly influence Bitcoin’s value. Announced on September 24, 2024, this reduction mirrors a similar action by the US Federal Reserve, which also implemented a 50bps interest rate cut shortly before on September 18. According to Jamie Coutts, a renowned cryptocurrency analyst, this reduction is expected to infuse approximately $113 billion into China’s equity markets, thereby creating a “stock stabilization fund” aimed at supporting the struggling sectors of the economy. This initiative is anticipated to alleviate borrowing costs related to approximately $5.3 trillion in mortgages. Historically, Bitcoin has shown a positive correlation with PBOC stimuli. For instance, in October 2023, after a substantial liquidity injection of $367.7 billion, Bitcoin’s price rebounded from $35,000 to near $40,000 before a further RRR cut in January 2024, which subsequently saw prices soar to over $71,000 by March 2024. Coutts posits that this latest RRR adjustment signals a critical turning point in global liquidity, suggesting that central banks worldwide may adopt similar measures. This shift in monetary policy might enhance the appeal of riskier assets, such as cryptocurrencies, particularly Bitcoin. Furthermore, as central banks contest rising unemployment with rate cuts, analysts speculate that the combination of Bitcoin’s halving events and reduced borrowing costs could propel its value. A projection by an executive from Standard Chartered Bank suggests that Bitcoin could attain a staggering $200,000 by the end of 2025. However, there are reservations within the analyst community regarding the diminishing impact of halving cycles on price movements. Presently, Bitcoin is trading at approximately $63,518, reflecting a minor increase of 0.4% over the past 24 hours.

This recent monetary policy adjustment by China occurs amidst broader global economic challenges, including rising unemployment and economic uncertainty due to inflationary pressures. By reducing the reserve requirement, the PBOC aims to stimulate the economy by injecting liquidity, which has historically had a favorable impact on risk assets, including cryptocurrencies. Understanding the correlation between central bank policies and cryptocurrency markets is crucial as it helps to gauge potential future price movements based on macroeconomic trends.

In conclusion, the PBOC’s decision to lower the reserve requirement ratio is poised to benefit Bitcoin significantly, potentially leading to a surge in its price. Historical patterns indicate that such stimulus measures correlate with aggressive upward movements in Bitcoin’s value. As global liquidity shifts and interest rates remain low, Bitcoin’s attractiveness as an investment may increase, further solidifying its role as a key asset in the current economic landscape.

Original Source: bitcoinist.com